Bonus Depreciation Eligibility Chart: January 1, 2016 ...

1 Bonus Depreciation Eligibility chart : January 1, 2016 December 31, 2019. When the Protecting Americans from Tax Hikes (PATH) Act of 2015 was passed, much attention was given to the extension of Bonus Depreciation through 2019. However, a key provision was also included in this legislation changing the definition of qualifying property eligible for Bonus Depreciation . Qualified Improvement Qualified Leasehold Qualified Retail Qualified Restaurant Property Improvement Property Improvement Property Property Abbreviation (QIP) (QLIP) (QRIP) (QRP). A new class of nonresidential real Any improvement to an interior portion Any improvement to an interior A building (new or existing structure). property that is eligible for Bonus What is it?

2 Of a nonresidential real property portion of a nonresidential real or an improvement to a building used Depreciation starting with improvements building property building for the consumption of prepared meals placed in service in 2016. Bonus Depreciation Yes Yes Yes No, unless QIP. Eligibility Improvements must be made to an Improvements must be made under Such portion is open to the Must also meet the criteria for a interior portion of a building which or pursuant to a lease by the lessee general public and is used in the QIP to be eligible for Bonus is nonresidential real property (or any sub lessees) of such portion, retail trade or business of selling Depreciation o Any improvements must be or by the lessor of such portion tangible personal property to the More than 50 percent of the placed in service after the date Such portion is to be occupied general public building's square footage is Satisfying criteria the building was first placed in exclusively by the lessee (or any Building can be owner occupied devoted to preparation of, and for Bonus service by any taxpayer sub lessee) of such portion seating for on-premises Depreciation : It must be original-use property Landlord or lessee can make the consumption of, prepared meals Must be qualified property under interior improvement Sec.

3 168(k)(2). Applies to interior common areas Building can be owner occupied Expansions or enlargement of the Enlargement of the building Enlargement of the building Restaurant tenant improvements building Elevators Elevators located within a multi-tenant Elevators Escalators Escalators building where 50 percent of the Escalators Any structural component Any structural component building's square footage is not Excludable Improvement made to the internal benefiting a common area benefitting a common area leased to restaurants (not improvements not structural framework of the Internal structural framework of the Internal structural framework of qualified restaurant property and qualifying for building)

4 Building the building thus, Bonus Depreciation cannot Bonus be taken). Depreciation : Specific examples: Removing load- bearing walls, completely replacing entire roof, replacing all rooftop HVAC. units How old must the Improvements must be placed in Improvements must be placed in service building be? service more than three years after the more than three years after the date the (This is the 3 year No requirement date the building was first placed into No requirement building was first placed into service rule) service Applicable 39 years recovery period/depreciable Note: QIP improvements that also meet 15 years 15 years 15 years tax life the definition of QLI, QFI, or QRP can be depreciated over a 15-year SL period Related party Tenant and Landlord cannot be related N/A N/A N/A.

5 Rules parties Tax Depreciation Mid-month convention/SL Method Half-year convention/SL Method Half-year convention/SL Method Half-Year convention/SL Method method Code Section Section 168(k)(3) Section 168(e)(6) Section 168(e)(8) Section 168(e)(7). Section 179. No, unless QLIP, QRIP, or QRP Yes Yes Yes Expense Eligible Unrelated Parties No Yes No No Rule Bonus Depreciation Rates 01/01/12 - 12/31/17 50%. 01/01/18 - 12/31/18 40%. 01/01/19 - 12/31/19 30%. Code Section 179 Limits Qualifying Property (For tax years beginning after 12-31-15*). The dollar limitation on the Code Sec. 179 expense deduction & maximum amount of qualified real property improvements (includes QLIP, QRIP, and QRP) that can $500,000.

6 Be immediately deducted: The reduction in the dollar limitation (beginning of phase- out) starts when property placed in service during a tax $2,010,000. year exceeds: Note: Air conditioning and heating units are also eligible Code Sec. 179 election. *Annual limits are indexed annually for inflation.